Mortgage Processing: A Step-By-Step Guide

mortgage processing services

You probably don’t need us to tell you that mortgages are special loans exclusively used for real estate transactions. After the creative financing fiasco ended up causing a full-blown global financial crisis, the rules for taking a mortgage out were modified entirely, and for a good reason. It explains why the mortgage application process might feel tedious and overwhelming.

Mortgages come in a wide variety, applications require a plethora of paperwork, and estimating your monthly payment can be challenging. The qualification requirements for a 30-year fixed rate mortgage are bound to differ from a 7/1 adjustable rate mortgage. 

Learning about the stakeholders and their vested interests is the best way to avoid wasting time. It necessitates coordinating with a loan officer or broker to secure the most favorable terms.

However, a few distinct steps can help you understand the mortgage process. This article shall serve as a step-by-step guide to mortgage processing to help you understand the process a little better. 

Types of Mortgages

There are numerous varieties of mortgage loans available, and each one is made to meet the requirements of a diverse set of borrowers. However, not every mortgage loan is the same. You can save time and money by doing your homework before making any decisions. Some brokers even offer mortgage processing services to help you gain a decent understanding of your situation. Moreover, the application process will be less of a mystery if you have a clear idea of what is expected of you in terms of requirements. Here are some of the mortgages that are available to most borrowers. 

  • 30-year fixed-rate mortgage
  • 15-year fixed-rate mortgage
  • Adjustable-rate mortgage
  • FHA mortgage
  • VA mortgage
  • USDA mortgage
  • Jumbo mortgage
  • Interest-only mortgage

A Quick Guide to Mortgage Processing

When you apply for a mortgage, the lender will evaluate your application based on several criteria to determine if you are a reasonable risk to take and can repay the loan. The main factors considered are your income and employment background, credit score, debt-to-income ratio, assets, and the sort of property you wish to buy. Here are the different stages of mortgage processing: 

  • Pre-approval

The most crucial step in securing a mortgage is determining your budget and the type of mortgage that best fits your needs. An accurate estimate of your monthly payments is the most crucial consideration when selecting a mortgage, given that it might impact your credit score. It might be the best time to figure out how much you would like to pay towards your down payment. 

  • Documents submission

Most lenders will ask for documentation for proof of your income and job status and details about your active loans and assets. It might include your tax returns and your salary slips. It is essential to acknowledge that these are not stringent requirements and only help the lender understand your profile more comprehensively. Providing more information than you have is not necessarily bad and enables you to process your mortgage faster. 

  • Finding a Home and Making an Offer

The most exciting element of getting a mortgage is often the house-hunting phase. As you explore different homes, you might daydream about what it would be like to live there. It is one of the more fun steps in the process, but you should still have a strategy. Depending on your budget, you may not locate a property with all your desirable attributes. To save time during your house search, it would certainly help if you developed a list of your main housing priorities. After you have narrowed down the perfect house for your needs, you will put an offer on the home, which might involve arranging for a deposit to be put in escrow until closing. 

  • Finalize Terms

After signing a purchase agreement, you can apply for a mortgage and resolve the specifics. If you haven’t already, explore the mortgages you qualify for, compare their rates, and choose a down payment and term length. You may have completed much of your application paperwork during pre-approval, but you still need certain final documents. 

  • Loan Processing

After the seller accepts your offer, your banker receives the purchase agreement. The lender will discuss your loan program alternatives. After that, underwriting involves an underwriter verifying your documents and employment history. At this stage, a lender might even leverage a mortgage virtual assistant to ensure that things are on track for closing. During underwriting, your lender will order a home appraisal. The appraisal protects you and the lender by confirming the home’s value. The home is appraised against nearby comparables. Suppose you’re buying a five-bedroom townhouse with a renovated roof. In that case, the appraiser identifies similar properties in the neighborhood, looks at sales data from the MLS, and offers an accurate estimate.

  • Closing

Once underwriting is finalized, the closing can take place. At the closing meeting, you’ll sign the mortgage and receive the deed to the property in exchange for the funds you brought as a down payment and any other closing charges. You can keep closing costs to a minimum by planning. Increasing the price of your offer is one strategy for getting the seller to agree to cover additional costs. You can finance the closing costs in this way. You can also lower it by using someone in your family with a real estate license to represent you while taking a haircut on their standard commission. 


Taking out a mortgage can be much more complicated if you do not follow the right guidelines. A better understanding of the process can help you save money while equipping you with the knowledge to become a real estate investor eventually.